Kiichiro Fukasaku Development Centre

Kiichiro FukasakuDevelopment Centre

Public Private Partnership in

Infrastructure Development

Japan-OECD-Vietnam Public Private Partnership ForumHanoi 3rd March 2008

Slide 2

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

Slide 3

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)

Slide 4

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 %

Slide 5

Challenges

• Globalisation and impact on infrastructure

• Urbanisation• Growing interdependence between

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

versa

Slide 6






Slide 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?

Slide 8

Investment Commitments 1990 – 2006PPP in Infrastructure in Developing Countries

(Source: World Bank PPI Project Database)

Slide 9

Investment Commitments by Sector

Total

Telecoms

TransportEnergy

Water


2006 US$ billions

Slide 10

Investment Commitments by Region


2006 US$ billions

Slide 11






Slide 12

Global Competitiveness Report World Economic Forum, 2007-2008

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

Slide 13

Asia: the Private Sector Re-engaging in Infrastructure Development

2006 US$ billions


Slide 14

Private sector investment in infrastructure

Estimated infrastructure needs

1984-2005 Asia 284.0$ billion - East Asia /

Pacific75.0

cumulative - Southeast Asia 136.6- South Asia 67.5- Central Asia 7.5

2006-2010 Asia 248.8$ billion - East Asia /

Pacific178.9

per year - South Asia 63.1- Central Asia 6.8

(Source: ADB‘s Infrastructure Operations, ADB 2007)

Slide 15

2006 US$ billions


Asia: Regional Imbalance

Slide 16

Asia: Regional ImbalanceEast 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)

Slide 17

Vietnam

1st (best)

131th

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

Status of infrastructure development ─ ranking among 131 countries

Slide 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

Slide 19






Slide 20

• 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

Slide 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

Slide 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)

Slide 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)

2006: $ 60 billion2008: est. $ 130

billion

2006: 4.7 % of GDP

≈ $

41 billion

2008: 8 % of GDP ≈ $

100 billion

Slide 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)

Slide 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

Slide 26






Slide 27

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

Slide 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

Slide 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 :

1.Design and manage PPP projects in infrastructure

2.Improve the institutional environment3.Encourage responsible business conduct

Slide 30

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

Documents

Kiichiro Fukasaku Development Centre