Critical Success Factors in theCritical Success Factors in the Delivery of PPPs in Southeast Asia

CARL WATSONRegistered Foreign Lawyer (England & Wales)Registered Foreign Lawyer (England & Wales)

16 November 2011

Pinsent Masons Who are we?Who are we?

PM is a full service international commercial law firm.

Total legal team of over 1,100 and more than 1,700 staff globally.

Global HQ in London (with UK network); offices in Gulf, Singapore, Hong Kong, Shanghai and Beijing.

30yrs in Asia: PM opened in Asia Pacific region in 1982.

Our knowledge of the region and involvement in some of its t hi h fil d i t t j t dmost high-profile and important projects underscores our

commitment to assisting clients throughout Asia.

E t bli h d l ti hi ith l di Phili i l F iEstablished relationship with leading Philippine counsel, Feria Tantoco Robeniol Law Offices (who we are working closely with on the PSALM transactions))

Pinsent MasonsGlobal PPP SpecialistsGlobal PPP Specialists

Over 60 PPP specialist lawyers and well in excess of 200 infrastructure lawyers and advising on all forms of projects involving public and private sector participationand private sector participation.

We have advised and continue to advise Governments, procuring entities, sponsors, IFIsGovernments, procuring entities, sponsors, IFIs and lenders globally on a range of PPP initiatives, focused on infrastructure projects (i l di t t d h lth )(including transport, power and healthcare).

Globally, we have closed over 200 PPP projects including several award winningprojects, including several award-winning PPPs (for example, SA’s Gautrain PPP)

PPP: The Basics (1)Drivers for infrastructure investment?Drivers for infrastructure investment?

A sign of economic growth & progressA sign of economic growth & progress

A sign of ability to compete

A sign of ‘development’ / ‘quality of life’ (economic and social)

Demands of population growth and higher living standards

Demands of increasing urbanisation

Necessity drivers – legacy of under-investment, needNecessity drivers legacy of under investment, need to renew and replace (and create)

PPP: The Basics (2)PPP Distinguishing FeaturesPPP Distinguishing Features

Conventional Public Procurement vs PPP

Public Procurement• Short term contract

PPP• Long term contract (20+years)

• Funded by public sector

Ri k h d b t bli

g ( y )• Funded wholly or largely by

private sectorRi k ll t d t t ‘b t• Risk shared between public

and private sectors• Delivery of infrastructure asset

• Risk allocated to party ‘best suited to manage the risk’

• Delivery of infrastructure asset is y= end of contract

• Payment by public sector for

yusually integrated with ongoing maintenance/operating services

• Payment – by public sector when• Payment – by public sector for duration of construction period

• Payment – by public sector when asset is delivered andoperational (‘unitary charge’)

PPP: Success Factors

See Pinsent Masons’ “10 Implementation Considerations” guidance paper (on our AP webpages)

Based on our experience of having closed over 200 PPP schemes globally

Practical lessons learned specifically from recently l d l lti t k h ld PPP tclosed complex, multi-stakeholder PPP procurements

Focus on delivery and maintaining momentum

PPP: Success Factors (1)Select the right processSelect the right process

Unsolicited Proposal+ve: can identify an unknown opportunity; save time & cost+ve: can identify an unknown opportunity; save time & cost-ve: lack of transparency; collusion risk; no competition

Competitive NegotiationsCompetitive Negotiations+ve: identify small group; competitive pressure; aim to get

best price; quicker & less expensive than full competitionp q p p-ve: bidder selection often not transparent; corruption risk; no

guarantee on best bidders participatingCompetitive Bidding+ve: competitive tension; transparency; IFI/funders happy;

best value promotedbest value promoted-ve: time-consuming; process driven; labour-intensive; costly

on both sides (‘opportunity cost’)o bo s des ( oppo u y cos )

PPP: Success Factors (2) Momentum BuildingMomentum Building

Country Risk PerceptionC id ti t l l l i fi ld d tiConsiderations: transparency, level playing field, domestic legal system (inc. PPP regime), financial stability of the country, level of government support offered, query if y, g pp , q yawards are made at national or state level

Government flexibility and willingnessConsiderations: government’s willingness to see that the project is completed will it recognise that events may notproject is completed – will it recognise that events may not run according to plan and that some compromise may be needed between the parties?

KEY = PIPELINE & THEN PROJECT MOMENTUM

PPP: Success Factors (3)Resourcing & Adviser TeamResourcing & Adviser Team

‘Day Job versus Project’ Conflict– Significant retained commitments– Secondments?– Clarity on project role(s) from outset– Project Co-ordinator is keyj y

Adviser team are ‘central not peripheral’p p– Crucial on large, multi-stakeholder schemes– Seamless and joined up, worked togetherSeamless and joined up, worked together– Add value, a 2 way street

PPP: Success Factors (4)CommunicationCommunication

Internal– Project Co-ordinator role key– Detailed communications plan– Approval process: Executive -Project Director link-

Project Team -Project Co-ordinator link- Sub Groups External– Consistent and Transparent– Clear lines of communication and a strategy– Clarifications and responses, needs organisation– Bidder Open Day / ‘soft market test’– Use of websites and e-procurement tools

PPP: Success Factors (5)PPP Agency/Central GovernmentPPP Agency/Central Government

‘Friend not Foe’

Project Director and Project Co-ordinator must proactively work closely on relationship with centreproactively work closely on relationship with centre

Will a ‘transactor’ / representative be assigned?Will a transactor / representative be assigned?

Communication and dialogue throughout

Key to understand parameters for negotiation/approval

Ensures consistency and continuity from inception to final approval – no surprisespp p

PPP: Success Factors (6)Role of international funding institutionsRole of international funding institutionsRemit of IFIs = consistent with implementation of PPP

For example: International Finance Corporation (part of 'World Bank Group'):

"[to] further economic development by encouraging the growthof productive private enterprise in member countriesof productive private enterprise in member countries,particularly in the less developed areas"

Asian Development Bank (ADB) in Strategy 2020:“[target to]… scale up private sector development and private

t ti i ll ti l hi 50% fsector operations in all operational areas, reaching 50% of annual operations by 2020;"

PPP: Success Factors (6 cont’d)Role of international funding institutionsRole of international funding institutionsIFIs: investing in PPP projects

Direct investment and financing (direct loans some grant funding) of PPP projects are considered to be a strategic priority

For example to date:For example, to date:ADB has invested US$17.5 billion in approved financingIFC has invested US$5 billion in PPP projectsIFC has invested US$5 billion in PPP projectsEBRD has invested €9.6 billion in PPP projects

Develop international standards and guidelines for achieving fairer and better quality procurementg q y p

PPP: Success Factors In SummaryIn Summary

Pipeline of – Feasible;– Well-structured projects PLUSp j

Clear and transparent procurement process PLUSp p p

Equitable and pragmatic approach to risk =q p g pp_____________________________________________DELIVERS BEST CHANCE FOR MOMENTUM TO BUILDDELIVERS BEST CHANCE FOR MOMENTUM TO BUILD

AND SUCCESS TO FOLLOW

Thank you for listening!y g

Carl WatsonRegistered Foreign Lawyer (England & Wales)Registered Foreign Lawyer (England & Wales)Pinsent MasonsT + 852 2294 3309T + 852 2294 3309E carl.watson@pinsentmasons.com

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