Mr Mathieu Verougstraete
UNESCAP Transport Division
Public Private Partnerships in infrastructure development
Seminar on “Capacity-building for the development and operation of dry ports of international importance”
Bangkok 18-19 March 2014
ContentWhat is the presentation about?
PPP Definition and value added
Short overview of recent trends
Government role
ESCAP support
DefinitionWhat is a PPP ?
A 10 years lease contract for dry port development/operation
"A long-term contract between a private party and a government agency, for providing public services and/or developing public infrastructure, in which the private party bears significant risk and management responsibility"
Some transfer of risk to the private partner
Long term (relationship beyond construction phase)
Contract based (different types exist)
Example
Privatization
MotivesWhy using PPP mechanism?
Involving Private Sector in public transport infrastructure
Accessing Private Capital Improving Risk
Allocation
Realizing Efficiency Gains
Innovation (modern inventory techniques…)
New source of revenue (consolidation / distribution)
Equipments ? Attracting customers ?
Dry Ports: suitable for PPPs?
Private capital ?
Efficiency gains ?
Transfer of risk ?
Supporting public infrastructure ?
Commercial Viability ?
Private
Public“Pure Public”
Option 1
Private
Public
“Pure Private”
Option 2
Land acquisition ?
Alternatives
Customs services?
PPP trends in Transportresources mobilized through PPP in Asia-Pacific
… for around 50 projects
Road (> 50%)
More than $20 billion per year
Geographical DistributionWhere was it used?
PPPs in Transport in Asia-Pacific (2001-2011)
High level of concentration
Influencing factorsWhy such a difference between countries?
PPP EnvironmentFinancial
Support
Policy Formulation
Legal Framework
Institutional Capacity
Economic and business climate
Why?
Policy
“Politics is (and will always be) the
main cause of death for transactions”
(IFC)
Private sector needs clarity before entering a market
High level politician championing PPP solutions ?
What’s the plan?
Legal and regulatory framework
Clarity on competent authorities, sector and private partner eligibility…
Effective and quick dispute-resolutionmechanisms (arbitrage, compensation…)
Procurement rules: fairness and openness of bids / contract changes
UNICTRAL Model Law on Privately finance
infrastructure
Institutional Capacity
Expertise on PPP solutionsIs there an institution advising government agencies on project suitability for PPP solutions?
Project development processWho is approving what and when?
Guidelines
≠ Transaction advisors
PPP UnitsTraining programme
Model contracts
Without money it is
unlikely that projects will
be developed
Financial Support Measures
Project development facilities (business plan, transaction advisors,…)
Proper accounting of government liabilities
Sovereign guarantees (minimum demand guarantees or guarantees against change in rules or expropriation,…)
Viability gap funding (capital grants)
Tax and customs benefits (tax exemptions or reduction of income duties)
To make projects attractive for private investors
Economic and business climate
Impact on business caseCargo flow ?
Macro-economic projections
Financial sector development
Growth
Inflation
Currency
Business climate (tax regime, red-tape, contract enforcement,…)
Access to finance?
ESCAP activities
Convening Decision Makers
Ministerial Conferences on PPPs (Seoul 2007 – Jakarta 2010 – Tehran 2012)
Expert Group Meetings
Independent Policy Advocacy
Readiness diagnostic tool
Advisory supports on legal and policy frameworks
Capacity building / knowledge sharing
Training Materials
Workshops
Key Publications
Active in supporting Asia-Pacific countries to engage the private sector for infrastructure development for nearly 10 years.
Background
Capacity building project on-going in 4 countries(Bhutan, Cambodia, Lao PDR and Myanmar)
Conclusion
PPP are complex
PPP = significant for infrastructure development
Project has to make sense from an economic point of view
Useful materials are available on ESCAP Website
Suitable model for Dry Port
Not free government resources
Political support
Specific expertise/capacity
Legal and regulatory adjustments?
Active role for Government