Syndicate content

Europe and Central Asia

Sharing PPP experiences across borders

David Lawrence's picture
How valuable are lessons of experience in PPPs from other countries? Legislative and regulatory environments differ, as do market conditions and the overall investment climate. So replicating a successful PPP in another country isn’t a simple as following the same steps or using similar contract or tender documents.
 
But that doesn’t mean lessons cannot be transferred. Even if conditions vary, the underlying principles of PPPs remain the same regardless of where it is executed. For example, a PPP is always a long-term contractual agreement between a government entity and a private company; it must be financially sound if it is to work; and risks must be identified, mitigated and allocated effectively. The details of how these principles are applied will vary depending on the regulatory and market conditions of each country. But the examples remain valid nonetheless.
 
In Ukraine, PPPs have been slow to catch on, initially because the business climate was so weak. The country’s neighbors were all more successful at implementing PPPs: Poland has 65 PPP projects underway according to the Ministry of Economy’s PPP database, and Moldova’s first PPP established a radiology and diagnostic imaging center. But none of Ukraine’s neighbors have done as well with PPPs as its Black Sea neighbor, Turkey.
 
Turkey is a regional PPP powerhouse. The 2014 PPI Global Update, which provides information on private infrastructure investment in emerging markets, puts Turkey in second place globally for the second year in a row with US$12.5 billion. In 2014 alone, 17 new projects were launched in mainly in power and transport. Not surprisingly, Ukrainian officials have been looking with great interest to Turkey’s success.

Olympic opportunity: Renew the ideal of the global Games – by restoring the Olympics to their historic home

Christopher Colford's picture

Wasting billions of dollars, time and time again, to stage self-indulgent sports spectacles is no way for any society to build shared prosperity for the long term. But just try explaining that common-sense economic logic to the sports-crazed cities that keep lining up to purchase a moment of fleeting fame – and that end up squandering vast sums, by building use-once-throw-away “white elephants” for one-off events like the Olympic Games or the World Cup soccer tournament.

The sports-industrial complex continues to beguile the gullible and the grandiose, even though scholars have long warned of the futility of sports-event-driven spending. Beijing spent about $40 billion to host the 2008 Summer Games, and Sochi spent upwards of $50 billion to stage the 2014 Winter Games – while Brazil spent $20 billion to host (and heartbreakingly lose) the final rounds of 2014 World Cup soccer. Not to be outdone for extravagance and excess, Qatar reportedly plans to spend as much as $200 billion for the 2022 festivities.

Like the deluded leaders of declining Rome – who distracted their once-industrious city into passivity by pacifying the populace with what the poet Juvenal derided as panem et circenses: "bread and circuses" – modern-day civic leaders are allowing their obsession with media-moment athletic fame to trample economic logic. The scale of their civic hubris – and the malign self-interest of the construction firms, financiers, flacks and fixers who goad credulous Olympic-wannabe cities into wanton overspending – is insightfully dissected in a valuable new book, “Circus Maximus: The Economic Gamble Behind Hosting the Olympics and the World Cup,” by Andrew Zimbalist, a professor of economics at Smith College.

In recent remarks at the World Bank, Zimbalist deplored the reckless rush that stampedes many cities into bleeding their civic coffers in the quest for Olympic notoriety. The saddest example may be the city of Montreal, whose debt from the 1976 Summer Games burdened the sorry city for 30 years.

Yet the suckers keep taking the bait. Boston, said Zimbalist, recently put forth an extravagant multibillion-dollar bid for the 2024 Summer Games – and only later, after the initial headlines and hoopla had abated, did more complete statistics reveal the likely scale of Boston’s folly. And, of course, the Olympic organizers would again stick the long-suffering taxpayers with the bill for any revenue shortfall.

Zimbalist’s logic is a wake-up call for those who somehow imagine that “this time is different” – that one-shot wonders might somehow produce long-term economic benefits. Some occasional exceptions suggest how very rare it is that optimists are rewarded: London, for example, may have gained a much-needed morale boost after its successful 2012 Summer Games, and two (but only two) Olympic festivals actually turned a profit – both of them in Los Angeles, which shrewdly re-used some of its 1936 Olympic facilities when it again played host to the Summer Games in 1984. But for most cities – Montreal in 1976, Sarajevo in 1984Athens in 2004 and many more – the money spent on soon-to-crumble stadia, ski jumps and swimming pools was a diversion from urgent human needs and productive investment.

Zimbalist makes a compelling case – yet beyond the diagnosis of the malady, one seeks a prescription to cure it. Can such Olympic megalomania be tamed? Are there other ways to build, and pay for, worthy sports facilities that honor the spirit of the Olympic Games while avoiding the overspending that bleeds their hosts dry?

A potential solution arose amid Zimbalist’s recent World Bank discussion. Rather than build one-shot Olympic facilities that are destined to be discarded as soon as each extravaganza is finished, why not build just one enduring set of permanent Olympic facilities that can be refurbished and re-used, year after year? Build it right, and build it only once: That way, the cost of building and maintaining an Olympic complex could be spread over generations.

Pursuing that solution seems especially timely right now, and here's why. Where is the historically logical place to locate such a permanent Olympic site? Why, in Greece, of course, where the Olympics originated in 776 B.C. and continued until 393 A.D. There could be no more authentic place to have today’s marathoners run than in Marathon itself – no more meaningful place to have skiers schuss than on Mount Olympus, or to have boaters ply the very waters that warmed Odysseus’ odyssey.

A small PPP in Ukraine delivers big results

David Lawrence's picture
Most public-private partnership (PPP) transactions you hear about are large, multi-million dollar infrastructure deals with serious global players competing in international tenders.

But PPPs don't have to be big to be successful. In Malyn, a town of nearly 30,000 in Ukraine, a biofuel PPP helped the city administration heat three schools last winter by refitting a municipal boiler house, allowing it to substitute expensive, unreliable imported natural gas with locally-produced biofuel made from locally-produced pellets made from wood or straw.

In aging societies, will young liberals become old conservatives?

Hernan Winkler's picture
The old saying goes, “If you’re not a liberal when you’re young, then you don’t have a heart - but if you haven’t become a conservative when you’re old, then you don’t have a brain.”

Scholars have long explored whether people’s opinions really change as they get older. This question is particularly relevant today for the aging economies of Europe, where the elderly are expected to reach 30 percent of the total population by 2050. And by 2030, the majority of voters will be 50 years or older in most countries of the region.
 
Elderly men, Serbia

Obrigado, Brazil!

Clive Harris's picture
Paving a highway in Brazil. In 2014, Brazil's
 infrastructure investment commitments
​drove an overall global increase.
In March we released the update from the Private Participation in Infrastructure (PPI) Database for the first six months of 2014, covering investment activity in energy, transport, and water and sanitation. The good news of a rebound of investment commitment from a decline in 2013 was noteworthy, alongside the heavy concentration of activity in Brazil.
 
The PPI Database’s 2014 full year update for these sectors has just been released, and it confirms the trends we began tracking for the first six months. Total investment in infrastructure commitments for projects with private participation in the energy, transport, and water and sanitation sectors increased six percent to $107.5 billion in 2014 from levels in the previous year. The total for 2014 is 91 percent of the five-year average for the period 2009-13, which is the fourth-highest level of investment commitment recorded – exceeded only by levels seen from 2010 through 2012. 
 
This increase over 2013 was driven largely by activity in Brazil. Without Brazil, total investment commitments would have fallen by 18 percent, from $77.2 billion in 2013 to $63.4 billion in 2014.  Although this is lower than H1 2014 (57%), Brazil’s large stake is a continuation of a recent trend.
 
The Latin America and the Caribbean (LAC) region saw $69 billion of investment commitments, or nearly 70 percent of the total for 2014. Three of the top five countries by investment commitments in 2014 were from LAC.  The top five, in order, were Brazil, Turkey, Peru, Colombia, and India. 

Helping governments act upon the advice they seek

Jyoti Bisbey's picture
Path along the Ishim River in Astana,
Kazakhstan. Photo: Jyoti Bisbey
“What is different now?” This question echoed through my head during my recent morning runs along the beautiful Ishim River in Astana, Kazakhstan.

I was in Astana on mission to launch the new technical assistance program for Kazakhstan’s PPP policy reform, which addresses bottlenecks that constrain project structuring. This reform is especially important if the country’s Almaty Ring Road PPP is to be effective. Almaty Ring Road has been a thought-provoking transaction because previous attempts to solidify the partnership have not panned out, and grasping the history is important to resolving this successfully. Moazzam Mekam, IFC’s Regional Manager for Central Asia, and I spent many hours brainstorming on scenarios that would allow us to bring all of the stakeholders into agreement.  Most of the time, it felt like we were trying to pull a rabbit out of a hat.
 
The Almaty Ring Road is Kazakhstan’s only PPP in preparation right now, and it’s in the spotlight during its prequalification stage. The advisory services are provided by IFC; three years of project preparation have been devoted to ensuring that this is the right project to take to market as a PPP.  As the World Bank Group continues to support Kazakhstan on bringing private sector participation into the delivery of public infrastructure services, the reality is that since the 2006 Concession Law, not one PPP project has transpired.  Before the Concession Law, there were three PPP projects, but all of them have had issues. 
 
As I resumed one of my sunrise runs in this very flat, picturesque, futuristic city, I recalled a recent conversation with Moazzam. He made the point that even when there is a high level of political support for PPPs in the country, institutional and regulatory frameworks are sometimes not ready for PPPs. Capacity and willingness to undertake PPPs at the line ministry/agency level is limited. In instances like this, or when conditions exist in a similar context, we must ask ourselves how to respond, and how to move forward.

Russia's recovery? In the long term, it depends on structural reforms

Birgit Hansl's picture
2015 is set to be a year of recession for Russia – with economic growth likely to come out somewhere between -2 and -4 percent.

The latest World Bank forecast for June projects a 2.7 percent contraction (based on an oil price of US$ 58 per barrel), which has been revised up from 3.8 percent (based on US$ 53 per barrel).

Nepal one month after the earthquake

Johannes Zutt's picture
Kathmandu after the first earthquake


It has been a month since a 7.8 magnitude earthquake hit central Nepal on April 25. What happened next? 
 
Having experienced a real threat of death, many survivors manifested avoidance (“I don’t want to talk about it!”), hyper-vigilance (“What’s that noise? Is the ground moving?”), intrusive thoughts (“What if the next big one may come while I’m asleep …?”) -- classic stress reactions.
 
Many Bank staff have had many sleepless nights as the aftershocks continued, more than 250 to date above a magnitude of 4, thirty above 5, four above 6, and—just when we first thought that life was becoming normal again—a 7.3 on May 12.
 
That one came like the first one, in the middle of the day, but it felt like an unwelcome nighttime guest, full of foreboding.  People ran into the streets screaming, or silly giddy on realizing that they had survived another one—but even more terrified at what would come next.  More people died; more buildings collapsed.  People who had moved back into their houses moved out again. 

Closing thoughts on the "Harnessing Digital Trade for Competitiveness and Development" conference

Rosanna Chan's picture

Fiber optic light bokeh. Source - x_tineDigital entrepreneurs have the potential to connect to global markets like never before. Whether selling physical goods on internet platforms, or providing digital goods and services that can be downloaded and streamed, an entirely new ecosystem of innovative micro and small businesses has emerged in the developing world.
 
The World Bank Group hosted some of the pioneers in this space for a full-day conference on Harnessing Digital Trade for Competitiveness and Development on May 19. Here, we heard entrepreneurial success stories—an online platform for jewelry in Kenya, a provider of software solutions in Nepal, an online platform for livestock trade in Serbia—and dove into the constraints and challenges of running a digital business in an emerging economy.
 
The scope of these challenges made these success stories, and the broader potential they represent, even more inspiring. From internet connectivity to logistics, from financial payments to trade regulations, from bankruptcy laws to entrepreneurial and consumer digital literacy-- clearly, more needs to be done to fully harness the potential of digital trade for competitiveness and development and to foster an enabling environment to digital trade.

CEO: Why Europe’s largest energy companies support carbon pricing

Gérard Mestrallet's picture
_


Gérard Mestrallet is chairman and CEO of ENGIE, formerly GDF Suez. He spoke at the World Bank Group about his company's support for carbon pricing and the involvement of Europe's energy companies in reinvigorating the EU's emissions trading system. 
 


Pages