kiichiro fukasaku development centre public private partnership in infrastructure development...

Kiichiro Fukasaku

Development Centre

Public Private Partnership in

Infrastructure Development

Japan-OECD-Vietnam Public Private Partnership Forum

Hanoi 3rd March 2008

11 IntroductionIntroduction

44 Challenges and Best PracticeChallenges and Best Practice

55 OECD Policy SupportOECD Policy Support

22 PPP in InfrastructurePPP in Infrastructure

33 Opportunities for AsiaOpportunities for Asia

Introduction

• Financing fails to meet infrastructure needspeople 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)

2000-10% of

World GDP 2010-20% of

World GDP 2020-30% of

World GDP

Road 220 0.38 245 0.32 292 0.29

Rail 49 0.09 54 0.07 58 0.06

Telecoms1 654 1.14 646 0.85 171 0.17

Electricity2 127 0.22 180 0.24 241 0.24

Water1,3 576 1.01 772 1.01 1 037 1.03

Total 1 626 2.84 1 897 2.49 1 799 1.79

1.Estimates apply to the years 2005, 2015 and 2025. 2.Transmission and distribution only. 3.Only OECD countries, Russia, China, India and Brazil are considered here.

(Source: Infrastructure to 2030, OECD 2007)

Outlook:

Annual World Infrastructure ExpenditureEstimated averages in US$ billion and %

Challenges

• Globalisation and impact on infrastructure

• Urbanisation• Growing interdependence between

infrastructure systems• Meeting future financial needs• Infrastructure vital for growth and vice

versa

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?

Investment Commitments 1990 – 2006PPP in Infrastructure in Developing Countries

(Source: World Bank PPI Project Database)

Investment Commitments by Sector

Total

Telecoms

Transport

Energy

Water


2006 US$ billions

Investment Commitments by Region


2006 US$ billions

Global Competitiveness Report World Economic Forum, 2007-2008

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

Asia: the Private Sector Re-engaging in Infrastructure Development

2006 US$ billions


Private sector investment in infrastructure

Estimated infrastructure needs

1984-2005 Asia 284.0

$ billion - East Asia / Pacific

75.0

cumulative - Southeast Asia 136.6

- South Asia 67.5

- Central Asia 7.5

2006-2010 Asia 248.8

$ billion - East Asia / Pacific

178.9

per year - South Asia 63.1

- Central Asia 6.8(Source: ADB‘s Infrastructure Operations, ADB 2007)

2006 US$ billions


Asia: Regional Imbalance

Asia: Regional Imbalance

East Asia and Pacific South Asia

Population In millions

1823 1378

Poverty% living on less than US$ 1/day

15 31

Urbanisation% urban population

43 28

Electricity% with access to electricity

88 43

Water% access to improved water sources

78 84

Sanitation% access to improved sanitation

49 35

Transport% of rural population living within 2 km of all-season roads

95 65

Communication% fixed/mobile phone subscribers

36 6

(Based on: Nataraj, Infrastructure Challenges in South Asia, ADB Institute 2007)

Vietnam

1st (best)

131th

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

Status of infrastructure development ─ ranking among 131 countries

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

• 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

Challenges Ahead

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

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)

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)

2006: $ 60 billion2008: est. $ 130

billion

2006: 4.7 % of GDP

≈ $

41 billion

2008: 8 % of GDP ≈ $

100 billion

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)

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

OECD Contributions

1. Monitoring OECD country policies in infrastructure developmentInfrastructure to 2030 Economic Surveys International Investment Perspectives

2. Support to public policy-makingOECD Principles for Private Sector Participation in Infrastructure

3. Support to donors Promoting Pro-Poor Growth: Four Guiding Principles for Meeting Infrastructure Challenges

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

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 :

1.Design and manage PPP projects in infrastructure

2.Improve the institutional environment3.Encourage responsible business conduct

OECD Policy Guidance for Donors

Four Guiding Principles

for Meeting Infrastructure Challenges

1. Use partner country-led framework for coordinated donor support

2. Enhance infrastructure’s impact on poor people

3. Improved management of infrastructure investment for sustainable outcomes

4. Increased and efficient infrastructure financing

(Source: Promoting Pro-Poor Growth: Policy Guidance for Donors, OECD 2007)

Thank you!

Kiichiro Fukasaku

Development Centre

kiichiro fukasaku development centre public private partnership in infrastructure development...

Documents

asia slide

regional imbalance slide

infrastructure systems

infrastructure efficiency

infrastructure urbanisation

adbs infrastructure

billions source

world gdp road2200