MDBs working in developing Asia contributed about 2.5% of the region's infrastructure financing in 2015 (ADB 2017b). These banks can play a vital role as catalysts to attract private sector investment into infrastructure assets, and bring the expertise and creativity to these projects that is often lacking in the public sector. An effective MDB effort to promote PPPs has been the provision of transaction advisory services; this is early-stage capacity building to improve the regulatory and institutional environment, and to support project preparation. The participation of MDBs in PPPs can lower project risks through policy dialogue to influence negotiations and help resolve disputes between governments and their private sector partners (Jandhyala 2016). Although MDBs have an important role to play in promoting PPPs, their involvement so far in projects in low- and middle-income countries has been minimal, particularly in developing Asia.
The mitigation of sovereign risk-an area where MDBs can make a difference-can strengthen the weak credit profiles that are holding back private investments in PPPs in developing Asia. Analysis of the various sources of private capital indicates that the region's infrastructure financing gap is more of a risk gap than a gap in available funds. MDBs can reduce the adverse impacts of these risks through credit enhancement products that seek to improve the risk rating of projects. MDBs can support the PPP process by advising on transactions and providing technical assistance. With accelerated global action on climate change, MDBs could also expand their risk-mitigation products to tackle climate risks and promote private investments in climate-resilient infrastructure.