Aid effectiveness and public-private partnership: Thailand’s development assistance in lao pdr and cambodia

1. Aid effectiveness and public-private partnership: Thailand’s development assistance in laopdr and cambodia Siripornwajjwalku Thammasat university 2014 australasianaid and international development policy workshop 13-14 february, 2014 Canberra, australia

2. Thailand’s international development cooperation policy and institutions • Thailand as an emerging donor • 1. Policy of being donor since 2003 • 2. Institutions • - Thailand International Development Cooperation Agency (TICA) • - The Neighboring Countries Economic Development • Agency (NEDA)

3. Outline of the presentation • Introduction • NEDA’s projects in Lao PDR and Cambodia: Some observations • NEDA and involvement of private sector in aid process • NEDA and PPPs: The possibility?

4. introduction • The research project titled “Institutional Arrangement and Aid Effectiveness: The relations between government agency and private sector” • to examine NEDA’s existing aid process in Lao PDR and Cambodia focusing on the involvement of for-profit private sector • to explore the possibility to promote PPPs as a tool to involve for-profit private sector in aid process

5. Neda’s projects in laopdr and cambodia • Amount of projects • Lao PDR: 6 projects • Cambodia: 1 project • Sector : infrastructure • Road • Railway • Airport • Drainage pipeline • Type of aid: tied loan • Modality : bilateral and demand driven

6. NEDA projects in Laos (1)

7. Neda projects in laos (2)

8. Neda project in cambodia

9. Neda’s project in laopdr and cambodia: budget

10. Neda’s projects: proportion of budget spent for thai goods and services (contractor for construction)

11. Neda’s projects: proportion of budget spent for thai goods and services (contractor for consultancy)

12. NEDA’s projects and observations • Purposes: economic cooperation, mutual benefits, and cordial relations • Size: small-scale in terms of budget and project size • Sector: infrastructure (not public services) • Highly concentration in terms of private sector (company) involvement • Highly economic beneficial to donor in terms of consultancy and construction • Highly dependence on donor in terms of consultancy and construction

13. Neda’s aid process and challenges • Unbalance between demand and supply  bigger demand • Not enough incentive for private sector due to non-economic scale of project in terms of budget and size • Lack of coordination between public-private sectors in aid process • Limited capacity of private sector in developing partners, particularly the procurement

14. Proposed alternative • NEDA’s main challenges • 1. Budget size • 2. Efficiency and Transparency • Proposed alternative • - the involvement of for-profit private sector • - the promotion of PPPs

15. “PPP” defined by international organization(a policy guideline) • Organization for Economic Co-operation and Development (OECD) • Public-Private Partnerships (PPPs) are long term agreements between the government and a private partner whereby the private partner delivers and funds public services using a capital asset, sharing the associated risks. PPPs may deliver public services both with regards to infrastructure assets (such as bridges, roads) and social assets (such as hospitals, utilities, prisons).  • The interest in PPPs has been growing in recent years and the need for fiscal restraint in most OECD Member countries is expected to further increase their usage. This presents policy makers with particular challenges that should be met with prudent institutional answers.

16. “ppp” defined by a multilateral donor • Asian Development Bank (ADB) • The term “public-private partnership” describes a range of possible relationships among public and private entities in the context of infrastructure and other services. Other terms used for this type of activity include private sector participation (PSP) and privatization. While the three terms have often been used interchangeably, there are differences. PPPs can follow a variety of structures and contractual formats. However, all PPPs incorporate three key characteristics: • A contractual agreement defining the roles and responsibilities of the parties • Sensible risk-sharing among the public and the private sector partner, and • Financial rewards to the private party commensurate with the achievement of pre-specified outputs.

17. “PPP” defined by bilateral donor • Japan International Cooperation Agency (JICA) • Utilizing the private sector for the provision of public services, PPP is a method of implementing programs through the coordination of the public and private sectors. It includes a wide range of schemes which are tailored to the level of participation of the private business, ranging from a simple consignment of a project to build-operate-transfer (BOT) and full privatization. “PPP infrastructure project” refers to infrastructure projects implemented through PPP.

18. “ppp” defined by bilateral donor • AusAID • The term describes a range of possible relationships among public and private entities in the context of infrastructure and other services. The public partners in a public-private partnership are government entities, including ministries, departments, municipalities, or state-owned enterprises. The private partners can be local or international and may include businesses or investors with technical or financial expertise relevant to the project. The government’s contribution to a public-private partnership may take the form of capital for investment (available through tax revenue), a transfer of assets, or other commitments or in-kind contributions that support the partnership. The government also provides social responsibility, environmental awareness, local knowledge, and an ability to mobilize political support. The private sector’s role in the partnership is to make use of its expertise in commerce, management, operations, and innovation to run the business efficiently. The private partner may also contribute investment capital depending on the form of contact.

19. Merits of ppp • Utilization of the private sector for the provision of public services  enlargement of budget size • For-profit private sector’s contribution to aid process • Providers of goods and services • Implementers or contractors of aid projects • Co-investors of aid projects Private Sector = Partner for development

20. Conditions for for-profit private sector involvement • Environment that makes private sector to engage in aid process • Rule of law • Effective public sector • Tax system • Open market and fair competition • Incentives for for-profit private sector to engage in aid process • Business opportunities • Tapping into emerging markets

21. NEDA and ppp: The possibility ? • NEDA’s Strategy • NEDA’s strategic plan 2012-2014 • 1. Integration between public – private sectors within the country, and with those of the recipient countries • 2. Promotion of private sector (for-profit private sector and private organization-civil society) involvement • 3. Less dependence on national budget • 4. Alternative sources of budget

22. Thank you