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ASSIGNMENT OVERVIEW
Assignment Title: Global toolkit on local currency finance for sustainable infrastructure
Assignment Countries: Global
ASSIGNMENT DESCRIPTION
The infrastructure financing gap is substantial, with annual
investments totaling approximately $2.7 trillion in 2020, leaving a shortfall
of $0.7 trillion. This gap widens when considering various country targets to
achieve net-zero emissions by 2050, as the energy and transport sectors account
for around 60 percent of emissions. The private sector’s role in bridging this
gap becomes vital, especially given the fiscal constraints of emerging markets
and developing economies (EMDEs), which have been exacerbated by the COVID-19
pandemic and geopolitical tensions.
To address this gap, there is an increasing demand for
innovative solutions to mitigate foreign exchange risk (FX) for global
investments in EMDEs, as FX risk is one of the key risks that offshore
investors in particular seek to mitigate when investing in infrastructure. In
this context, Local Currency Financing (LCF) of sustainable infrastructure is a
pivotal tool for averting these foreign exchange risks and unlocking additional
sources of private financing for sustainable infrastructure development in domestic
markets. Well-developed LCF markets can shield an economy from volatile foreign
capital flows, reduce the burden of hard currency repayments, curb the
accumulation of foreign debt, and tap into new domestic capital sources for
development.
To address these challenges, the World Bank’s Public Private
Infrastructure Advisory Facility (PPIAF) launched the Local Currency Finance
(LCF) program in 2023 that led to the delivery of a global study on LCF for
sustainable infrastructure finance with a focus on credit markets: Unlocking
Local Finance for Sustainable Infrastructure[1]. This report provided a desk
review of existing literature, an analytical framework for LCF, a, LCF policy
intervention framework, specific country recommendations based on country deep
dives (South Africa, Malaysia, Philippines, Indonesia, Egypt, Uzbekistan) and
key considerations to deepen local credit markets for sustainable
infrastructure. The report, delivered in partnership with the World Bank’s
Finance Competitiveness and Innovation (FCI) global practice, the International
Finance Corporation (IFC) and MIGA, identified a number of key drivers and
enablers for LCF:
· Scale of
private savings: The size of a country's private savings pool is
crucial for LCF.
· Local credit
market capacity: The ability and willingness of local credit markets
to provide long-term debt is essential.
· Local capital
market development: A well-developed local capital market can enhance
financing options.
· Cost
differential between Local Currency (LCY) and FX debt: A competitive cost
advantage for LCY debt over foreign currency debt is crucial.
· Structuring
and credit evaluation skills: Capacity for structuring and credit
evaluation skills for sustainable infrastructure financing is vital.
While this global study on LCF for sustainable
infrastructure set out to address some of the key gaps in research related to
commercial financing challenges in LCF for sustainable infrastructure, the
World Bank Group’s (WBG) evolution roadmap developed in 2023, the WBG Joint
Capital Markets Program Sustainable Finance Facility
(SFF) (JCAP-SFFF) implemented by FCI, and the International Finance
Corporation Private Sector Window (IFC PSW) are now building on this work by
continuing to emphasize the need to deepen and expand LCF solutions for
sustainable infrastructure by developing knowledge, tools, and resources to
build capacity for stakeholders to create the right conditions and instruments
to mobilize LCF for infrastructure and climate investment. Moreover, addressing
FX, interest rate, and currency risk in PPPs and enhancing domestic financial
ecosystems' capacity for LCF in PPPs is critical.
The sources of LCF may vary throughout a project's life
cycle, with different financing mechanisms, such as risk sharing facilities to
create LCF ecosystems and asset recycling to attract institutional investors
being two examples. World Bank Group guarantees at the project level or as part
of risk-sharing facilities through financial intermediaries could be offered to
demonstrate track record and build financing in nascent markets. These and
other mechanisms designed to close the infrastructure financing gap must be
geared towards the long-term objective of creating and strengthening the
enabling environment for transactions to be financed in local currency through
local financial markets.
For this
purpose, PPIAF in partnership with FCI and with the support of the World Bank
Group’s Infrastructure Finance Global Department (including the Global
Infrastructure Facility (GIF), and Quality Infrastructure Investment (QII)
Partnership), IFC PSW, the MIGA unified guarantees platform, and other World
Bank Group sector teams, have developed this new activity: Sustainable
Infrastructure Investment in Domestic Markets (SIIDM). SIIDM aims to
operationalize the findings from the global study on LCF to support the scaling
up of investment in sustainable infrastructure projects in domestic markets in
EMDEs by:
·
Supporting
the development of bankable local climate and infrastructure projects:
Enabling access to commercial financing through local credit and capital
markets.
·
Deepening
and expanding local currency financing solutions:
Developing knowledge, operational and practical tools, and resources to build
local financing capacity for stakeholders.
·
Operationalizing
the LCF ecosystem/analytical framework:
Deploying the framework outlined in the global study on LCF in the proposed LCF
toolkit for sustainable infrastructure.
·
Operationalizing
the LCF policy intervention framework:
Converting the framework into a report and policy note that provides guidance
on implementing policies that create a supporting enabling environment for
sustainable infrastructure investment with greater reliance on LCF.
·
Developing
practical tools and resources: Creating documents,
standardized templates, case studies, frameworks, and roadmaps to
operationalize the LCF policy intervention framework.
·
Piloting
country-specific recommendations: Implementing recommendations
in target countries (Egypt, Indonesia, Kenya, the Philippines, and Uzbekistan)
and leveraging PPIAF's portfolio of projects.
·
Providing
practical tools, resources, and capacity building programs:
Addressing key binding constraints and strengthening key drivers for the
development of a robust ecosystem for developing infrastructure with LCF.
To deliver on these objectives, the Infrastructure
Finance Global Department (IFD) unit of the World Bank Group (WBG) is seeking
an experienced international consulting firm that will develop a
web-based LCF toolkit and related training materials that will
assist global infrastructure practitioners in:
· Developing a
supportive enabling environment and policy frameworks for LCF of sustainable
infrastructure projects;
· Scaling up of
well-designed local currency (LCY) friendly sustainable infrastructure projects
including PPPs;
· Scaling up of
pooled investment vehicles (PIVs), credit enhancement and de-risking
instruments that can channel private investment into long-term assets such as
infrastructure projects;
· Conduct
consultations with relevant stakeholders to gather case studies and inform the
different modules of the toolkit based market international best practices; and
· Disseminating the
LCF toolkit and the global study on unlocking local finance for sustainable
infrastructure.
The toolkit will assist sustainable infrastructure
practitioners to identify LCF entry points and provide practical steps and
tools for the implementation of LCF interventions, from the upstream
macroeconomic and fiscal environment through to the downstream project design,
structuring, negotiation and early implementation stages.
The toolkit will comprise of 4 different modules, plus
training and dissemination, as follows:
1. Toolkit
Module 0: This will consist of a detailed self-assessment
framework/questionnaire that will inform countries on their LCF readiness and
provide a roadmap of those priority interventions that will need to be taken to
successfully design and implement sustainable infrastructure projects in LCY
through domestic markets.
Based on the results of the self-assessment under Module 0,
the toolkit user will then have the option of going through to Modules 1, 2 and
3, which are as follows:
2. Toolkit
Module 1: This will cover the development of a robust enabling
environment and policy framework to support sustainable infrastructure
investment in LCY.
3. Toolkit
Module 2: This will cover the structuring and scaling up of
well-designed LCY-friendly sustainable infrastructure projects, including PPPs.
4. Toolkit
Module 3: This will cover the scaling up of both instruments and
vehicles that can channel private investment into long-term assets such as
infrastructure and climate mitigation and adaptation projects.
After the completion of the toolkit under Module 0, the
consultant will be required to develop related training materials and support
the toolkit dissemination.
5. Training and
dissemination: A training program will be developed and delivered to
implement the outputs of the toolkit all the modules and in particular
leveraging the findings of the global study on unlocking local finance for
sustainable infrastructure.
More details on the task can be found in the attached TORs.
SUBMISSION REQUIREMENTS
The World Bank Group invites eligible firms to indicate
their interest in providing the services. Interested firms must provide
information indicating that they are qualified to perform the services
(brochures, description of similar assignments, experience in similar
conditions, availability of appropriate skills among staff, etc. for firms; CV
and cover letter for individuals). Please note that the total size of all
attachments should be less than 5MB. Firms may associate to enhance their
qualifications unless otherwise stated in the solicitation documents. Where a
group of firms associate to submit an EOI, they must indicate which is the lead
firm. If shortlisted, the firm identified in the EOI as the lead firm will be
invited to the request for proposal (RFP) phase.
Expressions of Interest should be submitted, in English,
electronically through WBGeProcure RFx Now
NOTES
Following this invitation for EOI, a shortlist of qualified
firms will be formally invited to submit proposals. Shortlisting and selection
will be subject to the availability of funding.
Only those firms which have been shortlisted will be invited
to participate in the RFP phase. No notification or debrief will be provided to
firms which have not been shortlisted.
If you encounter technical difficulties while uploading
documents, please send an e-mail to the Help Desk at corporateprocurement@worldbank.org prior
to the submission deadline.
[1]Link to Unlocking Local Finance for
Sustainable Infrastructure: https://documents.worldbank.org/en/publication/documents-reports/documentdetail/099091124150032446/p1791021e6a66f0531b4a11825d8f88cba9
