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Kiichiro Fukasaku Development Centre

Public Private Partnership in Infrastructure Development. Kiichiro Fukasaku Development Centre . Japan-OECD-Vietnam Public Private Partnership Forum Hanoi  3 rd March 2008. 1. Introduction. 4. 5. 2. 3. Challenges and Best Practice. OECD Policy Support. PPP in Infrastructure.

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Kiichiro Fukasaku Development Centre

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  1. Public Private Partnership in Infrastructure Development Kiichiro Fukasaku Development Centre Japan-OECD-Vietnam Public Private Partnership Forum Hanoi  3rd March 2008

  2. 1 Introduction 4 5 2 3 Challenges and Best Practice OECD Policy Support PPP in Infrastructure Opportunities for Asia

  3. Introduction • Financing fails to meet infrastructure needs people lack access to infrastructure worldwide 1 billion people without access to roads 1.2 billion without safe drinking water, 2.3 billion without reliable energy 2.4 billion without sanitation 4 billion without modern communication (Source: Promoting Pro-Poor Growth, OECD 2007)

  4. Outlook: Annual World Infrastructure Expenditure Estimated averages in US$ billion and % (Source: Infrastructure to 2030, OECD 2007)

  5. Challenges • Globalisation and impact on infrastructure • Urbanisation • Growing interdependence between infrastructure systems • Meeting future financial needs • Infrastructure vital for growth and vice versa

  6. 1 Introduction 4 5 2 3 Challenges and Best Practice OECD Policy Support PPP in Infrastructure Opportunities for Asia

  7. Infrastructure • Efficiency vs. equity • High up-front costs, late returns on investment • High multi-faceted risks and uncertainty • Political dimension • Public good character • Limited access to financial markets How to raise incentives for private sector involvement?

  8. Investment Commitments 1990 – 2006 PPP in Infrastructure in Developing Countries (Source: World Bank PPI Project Database)

  9. Investment Commitments by Sector 2006 US$ billions Total Telecoms Transport Energy Water (Source: World Bank PPI Project Database)

  10. Investment Commitments by Region 2006 US$ billions (Source: World Bank PPI Project Database)

  11. 1 Introduction 4 5 2 3 Challenges and Best Practice OECD Policy Support PPP in Infrastructure Opportunities for Asia

  12. Global Competitiveness Report World Economic Forum, 2007-2008 (based on: World Economic Forum, The Global Competitiveness Report 2007-2008)

  13. Asia: the Private Sector Re-engaging in Infrastructure Development 2006 US$ billions (Source: World Bank PPI Project Database)

  14. Private sector investment in infrastructure Estimated infrastructure needs (Source: ADB‘s Infrastructure Operations, ADB 2007)

  15. Asia: Regional Imbalance 2006 US$ billions (Source: World Bank PPI Project Database)

  16. Asia: Regional Imbalance (Based on: Nataraj, Infrastructure Challenges in South Asia, ADB Institute 2007)

  17. Vietnam Status of infrastructure development ─ ranking among 131 countries 1st (best) 131th (based on: World Economic Forum, The Global Competitiveness Report 2007-2008)

  18. Vietnam • “Vietnam serves as an excellent example of how infrastructure can foster a sharing of the benefits of growth … Economic development has been remarkably pro-poor, lifting around 20 million people out of poverty.” • Connecting East Asia, 2005

  19. 1 Introduction 4 5 2 3 Challenges and Best Practice OECD Policy Support PPP in Infrastructure Opportunities for Asia

  20. Challenges Ahead • Balance public and private engagement • Double imperative: profitability ↔social ends • Dichotomy of public and private interests • Limited institutional capacity • Specificity of infrastructure market • Commercial risks in developing countries • Political dimension

  21. Connecting East AsiaA New Framework for Infrastructure – ADB, JBIC, World Bank – 2005 • Rapid growth yet marked by 1997 crisis • Urbanisation vs. rural development • Regional infrastructure linkages • Environmental protection • Policy, agency & stakeholder coordination • Funding challenge

  22. Connecting East Asia New framework: Inclusive Development Infrastructure helps connect growth to the sharing of benefits (adapted from: ADB/JBIC/World Bank, Connecting East Asia, 2005)

  23. India Meeting infrastructure investment needs Government investment in infrastructure (Sources: OECD Economic Surveys: India, 2007; IMF World Economic Outlook, 2007; DEA/MoF/ADB, Facilitating Public-Private Partnership, 2006; Rastogi, India Infrastructure Report,2006)

  24. India Viability Gap Funding:funds up to 20% of cost for state projects implemented by private sector developer (competitive bidding) India Infrastructure Finance Company Ltd.: wholly government-owned company to provide long-term finance to infrastructure projects; priority for PPP + strong government commitment to PPP in infrastructure (Sources: OECD Economic Surveys: India, 2007; DEA/MoF/ADB, Facilitating Public-Private Partnership, 2006; Rastogi, India Infrastructure Report,2006)

  25. India: Lessons learnt • Government commitment • Transparency and communication • Innovative financing schemes • Capacity building • Proper risk allocation (efficiency, capacity) • Consideration of alternatives to PPP • Continuous private sector consultation

  26. 1 Introduction 4 5 2 3 Challenges and Best Practice OECD Policy Support PPP in Infrastructure Opportunities for Asia

  27. OECD Contributions • Monitoring OECD country policies in infrastructure development Infrastructure to 2030 Economic Surveys International Investment Perspectives • Support to public policy-making OECD Principles for Private Sector Participation in Infrastructure • Support to donors Promoting Pro-Poor Growth: Four Guiding Principles for Meeting Infrastructure Challenges

  28. Infrastructure to 2030 • Average annual infrastructure investment requirements to 2030: 3.5 % of World GDP • Government budgets tied to social spending in the future • New “business models” and innovative financial solutions needed  Analysis by sector

  29. Policy Guidance for Governments OECD Principles for Private Sector Participation in Infrastructure • practical implementation tool of 24 principles • aimed at governments and private sector actors • illustrates how to : • Design and manage PPP projects in infrastructure • Improve the institutional environment • Encourage responsible business conduct

  30. OECD Policy Guidance for Donors Four Guiding Principles for Meeting Infrastructure Challenges • Use partner country-led framework for coordinated donor support • Enhance infrastructure’s impact on poor people • Improved management of infrastructure investment for sustainable outcomes • Increased and efficient infrastructure financing (Source: Promoting Pro-Poor Growth: Policy Guidance for Donors, OECD 2007)

  31. Thank you! Kiichiro Fukasaku Development Centre

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