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1
JICA’S PRIVATE SECTOR
PARTNERSHIP ACTIVITIES
April 24 2013
Takehiro Yasui
PRIVATE SECTOR INVESTMENT
FINANCE DIVISION I
PRIVATE SECTOR PARTNERSHIP
AND FINANCE DEPARTMENT
JICA
Contents
1. Background and Role for JICA to be involved in
Assistance of Private Sector
2. Assistance Scheme to Private Sector
(1) Overall Image of Assistance
(2) Private Sector Investment Finance (PPP F/S)
(3) F/S for Private Initiated Infrastructure Project
2
3
1. Background and Role for JICA to be involved in Assistance of
Private Sector (1)
Increasing private sector
presence in developing
countries: Increase in the flow of private
funds
Changes in private
companies’ activities: CSR activities and BOP
businesses
・ Increase in development and investment by private companies in
developing countries as a result of rapid globalization, the expansion of
emerging economies and growing concerns over food, resources, energy,
water, etc.
・ Rapid increase in the flow of private funds into developing countries
(Private funds account for 70% of funds for developing countries)
・ Private companies gaining access to infrastructure and other areas that
previously had been reserved for the public sector
・ Development from conventional CSR activities into more positive ones
(strategic CSR)
・ Growing interest in BOP businesses (Next 4 Billion)
Principle
Assist Social and Economic Development of Developing Countries,
thereby contributing to sound development of world society
through -Technical Assistance
-Loan Assistance (ODA Loan and PSIF)
-Grant Assistance
Recently, private sector is getting more important role in social and
economic development of developing countries
4
Need for global
collaboration between
public and private sectors
Japanese government
policies New growth strategies
・ Expectations regarding the public sector reducing risks for private
companies
・ Suggestions and requests from economic organizations to enhance
collaboration with the private sector
・ Other aid agencies also regard private companies as important partners
and are enhancing private sector partnerships (USAID, WB, ADB, EBRD,
UNDP, etc.)
・ In April 2008, the government announced its “New Strategies for the
Enhancement of Collaboration between ODA programs and Japanese
Companies: Public Private Partnership for Growth Acceleration”
・ In June 2010, the government announced its “New Growth Strategies:
Scenario for the Revitalization of Japan” in order to promote “packaged
infrastructure exports”.
・ New LDP Governments keeps policies to promote technology and
experience of Japanese Company be utilized for oversea infrastructure
projects.
JICA has strengthened partnership with private sector and its
activities which contribute to development -Establish Private Sector Partnership and Finance Dept.(starts as OPSP
in 2008 and strengthened in this April)
-Introduce new schemes for assisting such private sector activities
Main Agenda for Today
1. Background and Role for JICA to be involved in Assistance of
Private Sector (2)
JICA’s Role
JICA’s additionality in supporting developing countries’ private sector
Finance
Long-term financing with modest lending condition
Technical Assistance (TA) Integrated support for indispensable factor for private business’s success
=> e.g.: TA for policy/system improvement, planning, human resource development
Risk Control Risk control by utilizing the close relationship with developing countries’ government
=> e.g.: ensure the tariff execution
Information/knowledge/network
Provision of developing countries’ information/knowledge/network
=> e.g.: Complement the lack of information (lower the cost / entry barrier)
JICA, utilizing various methods, will provide one-stop supports
for projects including sourcing and structuring, construction,
operation, and maintenance of projects/business.
PPP F/S, BOP F/S Technical
Assistance ODA Yen Loan
Private Sector
Investment Finance
2. Assistance Scheme to Private Sector
(Private Sector Promoting Operation)
6
(2) PSIF (Private Sector Investment Finance)
- Outline, Target Sector, Major Conditions,
- Candidates, etc.
(1) Overall Image of Assistance
- JICA’s Support to PPP Promotion as a Whole
(3) PPP F/S (F/S for Private Initiated Infrastructure Project)
(1) JICA’s Support to PPP Promotion as a Whole
7
JICA
Government Policy and Framework
Government Portion (if any)
(Government Support)
Private Portion
(Project Company)
Govern
ment A
gen
cie
s
(eg.
Wate
r S
upply
Com
pany,
Railw
ay C
om
pany)
Govern
ment
Win
dow
(R
eg
ion
al a
nd
Se
cto
r D
ep
t.)
Pri
vate
Win
dow
(O
PS
P)
PPP Project
Technical Cooperation (Law and Regulation,
Tariff Framework,
Feasibility Study (F/S),
etc.)
Technical Cooperation (Capacity Development, Management Improvement,
etc.)
PSIF Technical Assistance (PSIF T/A) (Capacity Development, Management Improvement,
etc.)
JPN ODA Loan (Long term, Low Interest)
PSIF (Loan/Equity) (Long term, Low Interest)
PPP F/S (Private Initiated F/S)
Contract (Off Take, etc.)
(2) PSIF (Private Sector Investment Finance)
8
(A) Outline
PSIF
One of Official Development Assistance (ODA) Schemes
⇒ Purpose: Support economic development and Poverty Reduction
Loan (long tenor) & Equity
Direct Support for Private Companies
(available for JV with Government Companies)
⇒ therefore, request or other procedures taken by recipient
Governments are NOT required
Recipient Government
PSIF
Japanese ODA Loan
(Yen-Loan)
Executing Agencies Private Companies
(Project Companies)
9
(2) PSIF (B) History
Dec. 2001: Stop Operation of PSIF(due to Public Sector Reform)
●Increase of role of Private Sector in Development of Developing Countries ●Movement of Japanese Private Companies toward promoting oversea business and project
Starting Discussion Restart of PSIF
Cabinet Decision “Strategy (Honebuto) 2009”: Start PSIF after establishment of
implementation arrangement, etc.
Mar. 2011:Restart of PSIF under Pilot Approach
● “Industrial Human Development Project in Vietnam” and “Microfinance Project in
Pakistan” Approved
● For “Utility Management of Environment Friendly Industrial Parks and Water
Supply Project in Long An Province, Vietnam”, D/D completed
Oct. 2012:Start of Full Operation of PSIF
Regulations and Guidelines for implementation of PSIF developed
So far, 3 projects approved under PSIF Operations after restart
1
0
1. MDGs and Poverty Alleviation: Assistance to Projects for the Poor
Enhanced financial access to the poor (microfinance and SME-
finance) Assistance with businesses leading the improvement of lives of the
poor (BOP business)
2. Climate Change: To Prevent and Reduce Negative Impact to the Poor by
Climate
(e.g. forestation, renewable energy, energy efficiency projects, etc)
3. Infrastructure and Growth: To Accelerate Economic/Social Growth
through Infrastructure Development Infrastructure for the poor (e.g. social infrastructure in education and
health, rural electrification, water supply services, roads, etc) Projects for Social / Economic Development (e.g. infrastructure in the
sector of power, transportation, water and waste disposal, etc)
(C) Operating Rules of PSIF Target Sector
PSIF supports Projects which Private Financial Institutions cannot
finance without JICA’s Involvement
PSIF JPN ODA Loan
Project Type Private Project Government Project
Financing Tool Equity Investment / Loan Loan
Currency Japanese Yen (Loan)
Local Currency (Equity)
Japanese Yen
Terms of Loan
- Interest Rate
- Repayment Period
- Grace Period
- Maximum Share
Fixed Rate (Base rate :GoJ Bond
plus), JPY-denominated*
Up to 20 years
(Up to 25 years in special cases)
Up to10 years
70% (80% in special cases)
(For Vietnam)
Normal ODA loan: 1.4%
Special Condition: 0.2%
Normal ODA loan: 30 years
Special Condition: 40 years
(Revised periodically)
10 years
85%
Procedure -Initiated by the private company’s
request
-Initiated by official request of
government of recipient countries
Security -Sovereign guarantee is not required -Sovereign guarantee or
Government borrowing
1
1
Major Conditions
• Investees
JICA invests in commercially viable projects (or fund)
e.g. PPP infrastructure project company (SPC), individual project
sponsors
• Share of Equity
JICA cannot take majority share, maximum 25 % of the total capital
• Exit Policy
Pre-arrangement of exit plan required for successful transition to
sustainable private business
Major Conditions
1
2
Equity Finance (Investment)
To construct, operate and maintain by a Japan-Vietnam Joint company a treatment plant for
industrial waste water and water purification plant for surface water for industrial parks in Long An
Province (part of water will be supplied to the Public through Long An Province
Project Company
- Utility service such as waste water
treatment
- Water supply
Japanese company
(KOBELCO Eco Solution)
Vietnamese
company
JICA
Equity Equity
PSIF Loan
1. Introduction of Japanese technologies and know-how
Vietnam is facing problems such as land subsidence by
too much intake of underground water or environmental
damages by waste water
The project is expected to contribute to environmentally
friendly industrial development through Japanese reliable
environmental technology
First project for Kobe city to participate through its
subsidiary company (Partnership with Japanese Local
Government)
2. Platform development for Foreign SMEs
Long An Province is strongly inviting Foreign (especially
Japanese) companies (including SMEs)
Long An Province is preparing for value added service
such as rental factories and one-stop service. JICA is also
planning to provide TA.
3. Model project for PPP projects in Vietnam The project is expected to be a model for future PPP projects
工業団地入口 13
Kobe City
(D) Project 1
Utility Management of Environment Friendly Industrial Parks and
Water Supply Project in Long An Province, Vietnam
Rationale of the Project
14
(D) Project 2
Industrial Human Resources Development Project Abstract
The Project aims to secure employment of quality workers for private companies
expanding business in Vietnam (especially foreign companies including Japanese ones)
through providing basic vocational training to Vietnamese students, who will be sent to
Japan for extensive training in Japan and return to Vietnam with high skills.
JICA
Esu Hai -To provide Japanese and basic vocational training
before dispatching students to Japan
-To support employment of the returning students in
Vietnam by introducing them to Japanese companies in
Vietnam
PSIF Loan
Rationale of the Project
1. To accelerate development through Japanese technology - The Project contributes to improvement of quality of
human resources through vocational training before dispatching trainees to Japan and training experiences in Japanese companies
- The Project is expected to introduce a new business model of Japanese human resource development system to Vietnam, and increase the number of human resources with Japanese discipline.
2. To accelerate the expansion of business of Japanese companies to Vietnam Returning Vietnamese trainees are expected to play as a main workforce for Japanese companies coming to Vietnam. This improves the business environment for Japanese companies in Vietnam and may introduce more Japanese newcomers.
15
(D) Project 3
Microfinance Project for Poor People in Pakistan
【Abstract】
● To support “The First Microfinance Bank Pakistan (FMFB-P)” for the expansion
of its business through strengthening management and financial basis expansion
The First MicroFinance Bank Pakistan
(FMFB-P)
JICA IFC
Poor and Low Income People
●Job Generation by assisting Micro Enterprises
●Endowment of Women
●Improvement of Living Conditions
Equity Equity
Expansion and Provision of
Financial Service for Poor People
Aga Khan
Group
Equity
【Rational】
1.Poverty Reduction though Improvement of
Financial Access by Poor People
2.Collaboration with NGO and Donor
Supporting Poverty Reduction
Background:
F/S is necessary for project implementation.
F/S costs are risk money for private companies. However, conducting a F/S on
challenging projects in developing countries are in many cases difficult without public
sector support.
JICA bears all or part of cost of F/S by means of soliciting proposals for F/S on PPP
projects from private companies, and entrusting implementation of F/S to the proponents
who submitted successful proposals.
(1) Overview of the Scheme
Eligible projects:
PPP infrastructure projects in developing countries
Preparation for utilizing JICA ODA assistance or PSIF
Proponents should have an intention to invest in the project (not only construction)
Results:
5 batches since 2010, 34 proposals awarded.
JICA’s PPP F/S
No Country Project Title
1 Indonesia Application of Waste water Reclaiming in Sothern Bali water supply system
2 Indonesia West JAVA Regional Solid Waste Treatment and Final Disposal
3 Malaysia Creation of the Best Optimized Water Infrastructure PPP in Major Urban Areas
4 Philippines PPP project for Development of a connector road in Manila
5 Vietnam Utility Management of Environment-Friendly Industrial Parks
6 Vietnam Song Hau 1 Coal Fired Power Plant Project and its related common
infrastructures
7 Vietnam Urban Development with Above-and Under-Ground Combined Structures at Ben
Thanh Station Area in Ho Chi Minh City
8 Vietnam PPP Duong River Water Supply System Project
9 Vietnam Long Thanh International Airport Development Project
10 Vietnam Yen Xa Wastewater Treatment Plant in Hanoi
11 Vietnam Phap Van-Cau Gie Expressway Project
Fir
st
Batc
h (
as o
f M
ar,
2010)
Seco
nd
Batc
h (
as o
f N
ov
, 2010)
17
PPP Infrastructure F/S Assistance: 11 projects were selected in JFY 2010.
No Country Project Title
1 Indonesia Central Sewerage Treatment System in Jakarta
2 Indonesia Capacity Expansion of Railway Line – Lahat – Kartapati in South Sumatera
3 Indonesia Jakarta Integrated Urban Hub Development Project
4 Indonesia Umbulan Spring Water Distribution System Project in East Java
5 Vietnam Hanoi Urban Railway Line No.5
6 Vietnam Water Supply and Sewerage System Development in Phu Quoc , Kien Gian
Province
7 Vietnam Trung Luong-My Thuan Expressway Project
8 Mongolia PPP-based Ulaanbaatar Metro Project
9 Indonesia Small Hydro projects in Sumatra and Sulawesi
10 Philippines Water Supply and Sewerage Development Project in the West Zone of Metro
Manila
11 Vietnam PPP Project for Development of Bien Hoa-Vung Tau Expressway
12 Vietnam Can Tho City Water Supply Improvement Project
13 Vietnam Wastewater Management and Solid Waste Management for Da Nang City
14 India Urban Railway Project in Pune City
15 Sri Lanka South Container Terminal for Colombo Port Expansion Project
16 Iraq New Fertilizer Plant and Intermodal Transportation Terminal Project in Khor Al
Zubair
Th
ird
Batc
h (
as o
f M
ar,
2011)
Fo
urt
h B
atc
h (
as o
f S
ep
, 2011)
18
PPP Infrastructure F/S Assistance: 16 projects were selected in JFY 2011.
19
No Country Project Title
1 Indonesia The Preparatory Survey on Intelligent Transport System Project to Eliminate
Traffic Congestion in Jakarta
2 Vietnam The Preparatory Survey on Long Thanh New International Airport Development
and Passenger Terminal Management Project
3 Vietnam The Preparatory Survey on Water Supply Project in New City and Industrial Park
in Northern Part of Binh Duong Province
4 Vietnam The Preparatory Survey on Da Nang Hoa Lien Water Supply Project
5 Laos The Preparatory Survey on Xe Katam Hydropower Plant Project
6 Cambodia The Preparatory Survey on Phnom Penh Autonomous Port Container Terminal’s
Special Economic Zone and Associated Facilities Construction Project
7 Mozambique The Preparatory Survey on Urea Fertilizer Complex Project
PPP Infrastructure F/S Assistance: 7 projects were selected in JFY 2012.
20
20
Way forward: Some Key Issues in PPP and JICA’s role
Insufficient
Risk Allocation
- Private sector needs Public to bear major risks
(e.g. land acquisition, project risks, financial risks)
- On the other hand, the Government side’s main
interest tends to be nothing more than to procure
the finance from the private.
- As a result, private investors tend to feel that they
have to bear too many risks to enter PPP projects.
Private sector in general cannot take the risks
which are beyond their control
- Risks should be borne by those who can best
control and manage them, but the government
side tend to put too much risk to private investors,
assuming private sector must take all the risks in
PPP projects
JICA’s role
• To explain the importance of risk allocation to public entities, through
TA program
• To make necessary regulatory advice on PPP-related law to allow
more optimal risk allocation
Low payment capacity for service:
In the example of water sector
USD/ton
HCMC 0.19
Hanoi 0.23
Manila (Maynilad) 0.25
Shanghai 0.31
Beijing 0.46
Jakarta 0.46
Mexico 0.49
Korea 0.77
Portugal 1.23
Greece 1.40
Italy 1.45
Canada 1.58
Japan 1.85
Spain 1.92
New Zealand 1.98
Hungary 2.02
Poland 2.12
Czech Republic 2.43
Australia 2.44
Switzerland 3.13
Sweeden 3.59
France 3.74
Great Britain 3.82
Belgium 3.92
Finland 4.41
Denmark 6.70
*These tariffs are based on 2010’s value,
and may be lower than the current ones
Water tariff is generally very low in developing
countries, which makes PPP projects challenging
without any support from the government side
Water tariffs around the world
JICA’s role
•Capacity building of water companies to
strengthen operational and financial
capacities, ultimately increasing the payment
capacity
•VGF*
•Concessional financial facilities
(longer terms and grace period, low interest
rate)
*under consideration
Low tariff & service charges
23
Thank you!
For inquiries, please contact
Nobuhiro KAWATANI
Deputy Director, Private Partnership Division
Office for Private Sector Partnership
Ph: +81-3-5226-6962