ppp trends and initiatives in south asian countries
TRANSCRIPT
PPP trends and initiatives in South Asian Countries
Policy Dialogue on PPP for Infrastructure
Development in South Asia
Organized by UN ESCAP
21-22 September 2015
Page 2
Agenda
Infrastructure Assessment of South Asian Countries 1
Emergence of PPPs in South Asia
India’s experience so far 3
Challenges and Way Ahead for PPPs in South Asian Countries 4
2
Page 3
South Asia region lags behind in infrastructure development…
Key points:
►No South Asian country in Top-50
►Huge infrastructure gap in all South Asian countries
Source: The Global Competitiveness Report 2014–2015
Note: Information not available for Afghanistan and Maldives
Infrastructure Ranking
127
92 87
132 119
75
Bangladesh Bhutan India Nepal Pakistan Sri Lanka
Page 4
…hence, the region requires $ 4-5 trillion of investment by 2030…
Key points:
►Investment to a tune of USD 4-5 trillion required between 2010 and 2030 to bridge
the gap
Americas
$16–17 trillion
Europe
$8–10 trillion Asia/Oceania
$15-20 trillion
Africa/Middle-East
$2–3 trillion
US / Canada
~$6-6.5 trillion
China ~$6.5-7 trillion
India ~$3-3.5 trillion WORLD TOTAL
$40 – 50 trillion
Source: BCG report – The Global Infrastructure Challenge 2010, Secondary research, EY Analysis
Infrastructure Investment Requirement
Page 5
Public sector spending alone wouldn’t suffice $ 4-5 trillion investment requirement…1/2
Source: www.cia.gov, EY Analysis (As per 2004 estimates)
Key points:
►Budget deficit has put substantial constraints on scarce public resources in most
south Asian countries
-12 -10 -8 -6 -4 -2 0 2
Bangladesh
Bhutan
India
Nepal
Pakistan
Sri Lanka
Budget Surplus/Deficit (as % of GDP)
Page 6
Public sector spending alone wouldn’t suffice $ 4-5 trillion investment requirement…2/2
Source: www.cia.gov, EY Analysis (As per 2014 estimates)
Key points:
►Huge public debt puts further constraints on scarce public resources
►Major share of USD 4-5 trillion of investment to come from the private sector
0 20 40 60 80 100
Bangladesh
Bhutan
India
Nepal
Pakistan
Sri Lanka
Public Debt (as % of GDP)
Page 7
3 2 4 6 10
33 31
17 24 25
14 23 21
36 34 35
84 72
62 70
117 129
142
34 40
90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14
Number of PPP Projects (Finacial Closure Achieved)
…PPPs in infrastructure have gained momentum in the region since 1990…
Source: http://ppi.worldbank.org/ , EY Analysis
Early Days Kick-off Phase (1994-2001) PPP Boom (2002 onwards)
► Total 15 projects worth USD 1.8 billion
► 8 projects in Energy sector; 1 in Transport sector and 6 in Telecom sector
► Total 177 projects worth USD 33.3 billion
► 86 projects in Energy sector and 46 projects in Transport sector
► Total 876 projects worth USD 351.4 billion
► India major contributor
► 458 projects in Energy sector and 377 projects in Transport sector
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India
0
50
100
150
200
250
300
350
400
0 100 200 300 400 500 600 700 800 900
Inve
stm
ent
in U
SD
bill
ion
Total Number of PPP Projects
India is leading the way for PPP projects in the region…
Country wise PPP projects and investments till 2014 ► India front runner in PPP projects -
Financial closure for 847 projects
(76% of total projects) amounting to
USD 338 billion
► Energy and Transport sectors have
been the focus of private sector
participations in the region
Key points:
►India is front runner in terms of numbers of PPP projects and investments
►Afghanistan, Bhutan and Maldives have not seen much PPP investments
Source: http://ppi.worldbank.org/ , http://www8.cao.go.jp/pfi, EY Analysis
Page 9
India’s PPP story so far 50% of infrastructure investment to come from private
22%
37%
48%
Tenth FYP Eleventh FYP Twelfth FYP (P)
Infrastructure investment
Private
Public
Source: Twelfth Five Year Plan and Eleventh Five Year
Plan, Planning Commission
0123456789
20
02
-03
20
03
-04
20
04
-05
20
05
-06
20
06
-07
20
07
-08
20
08
-09
20
09
-10
20
10
-11
20
11
-12*
Investment (as %age of GDP)
Private Public Total
Tenth FYP Eleventh FYP
* Estimated, Source: Gajendra Haldea, “Building Infrastructure: Challenges and
Opportunities,” 7 July 2010; Twelfth Five Year Plan 2012-2017, Planning
Commission
Key points:
►Private sector participation has continuously increased with 12th FYP envisaging
around 50% of infrastructure investment to come from private sector
Page 10
India’s PPP story so far Score on Critical Success Factors (CSFs) encouraging PPP
Weak
Moderate
Strong
*Scoring is based on our perception
PPP Projects in India
Robust Risk
Allocation
Framework
Economic &
Financial
Viability
Adequate
Government
Support
Strong &
Matured
Private Sector
Stakeholders
Participation &
Interactions
Stable Political
Situation & Will
Transparent &
Fair
Procurement
Process
Well
developed
Financial
Market
Strong Legal/
Regulatory
Framework
Page 11
1
India’s PPP story so far But still lot to be achieved
Policy / Regulatory Reforms ► Preparation and implementation of dedicated PPP policy and rule
► Creation of an Independent PPP Regulator and Dispute resolution courts
► Making Value-for-money (VFM) mandatory for each project in the PPP policy/ rule
2 Institutional Reforms
► Development of institutional capacity at state and local body level
► Improvement of PPP database management at national and state level
3 Financing Reforms
► Development of long term lending financial markets in the country
► Development of new financial products such as take-out financing and refinancing
Page 12
PPP projects in the South Asia region face multi-facet challenges…
Weak Legal/ Regulatory Framework
Poorly Prepared/ Structured Projects
Lack of Capacities
Weak Financial Environment
►Absence of
legislation
►Absence of sector
specific regulators
in many countries
except India
►Absences of Model
Concession
Agreements
(MCAs) with robust
risk allocation
framework in many
countries
►Dispute resolution
mechanism is a
major area of
concern
►Value for money
analysis not given
much priority
►Except for India,
most countries in
the region
significantly lack in
capacities, both in
public and private
sector
►Lack of dedicated
financial
institutions in most
countries
►Limited
involvement of
insurance/ pension
funds
►Lack or
underdeveloped
financial products
such as long term
loans, take-out
finance, etc.
Page 13
To foster infrastructure investment and thus growth, the Region needs to overcome existing challenges by…
►Regional co-operation on knowledge sharing, improvement of financial
climate, and capacity building of both private and public sector
►Strengthening the regulatory and legal framework
►Putting more emphasis on project preparation including value for money
analysis
►Development of robust risk allocation framework and dispute resolution
mechanism
►Development of local infrastructure bond markets, long term lending
institutions, and innovative products such as take-out financing and
refinancing
Page 14
Thank You Abhaya Agarwal Partner - Infrastructure and PPP
Ernst & Young LLP 6th Floor, Hindustan Times House, 18-20, Kasturba Gandhi Marg, New Delhi, Delhi 110 001, India
Phone: +91 11 4363 3000 Email: [email protected]